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Popular, Inc. Reports Net Income Of $47.2 Million For The Quarter Ended September 30, 2012

Founded in 1893, Popular, Inc. is the leading banking institution by both assets and deposits in Puerto Rico and ranks 36th by assets among U.S. banks. In the United States, Popular has established a community-banking franchise providing a broad range of financial services and products with branches in New York, New Jersey, Illinois, Florida and California.

An electronic version of this press release can be found at the Corporation’s website,
www.popular.com.

Popular will hold a conference call to discuss the financial results on Friday, October 19, 2012 at 10:30 a.m. Eastern time. The call will be broadcast live over the Internet and can be accessed through the investor relations section of the Corporation’s website:
www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call may also be accessed through a dial-in telephone number 866-713-8565 or 617-597-5324. The conference code is 49080948.

A replay of the webcast will be archived in Popular’s website during the respective period. A telephone replay will be available from 12:30 p.m. on Friday, October 19, 2012 to 11:59 p.m. on Friday, October 26, 2012, at 888-286-8010 or 617-801-6888. The replay passcode is 67907864.

[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.

[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.

[2] Non-performing loans held-for-sale as of September 30, 2012 consisted of $88 million in construction loans, $18 million in commercial loans, $3 million in legacy loans and $53 thousand in mortgage loans (June 30, 2012 - $160 million in construction loans, $18 million in commercial loans, $425 thousand in legacy loans and $53 thousand in mortgage loans; September 30, 2011 - $235 million in construction loans, $24 million in commercial loans, and $1 million in mortgage loans).

[3] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to nonperforming since the principal repayment is insured. These balances include $82 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of September 30, 2012.

[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.

[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of September 30, 2012, the general allowance on the covered loans amounted to $110 million, while the specific reserve amounted to $15 million.

[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.

[2] Excludes covered loans acquired on the Westernbank FDIC-assisted transaction. As of June 30, 2012, the general allowance on the covered loans amounted to $103 million, while the specific reserve amounted to $14 million.

[3] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.

[2] Approximately $153 million of the Corporation’s $546 million of net deferred tax assets at September 30, 2012 (June 30, 2012 - $151 million and $573 million, respectively; September 30, 2011 - $126 million and $342 million, respectively), were included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $366 million of such assets at September 30, 2012 (June 30, 2012 - $393 million; September 30, 2011 - $223 million) exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets”, were deducted in arriving at Tier 1 capital. The remaining $27 million of the Corporation’s other net deferred tax assets at September 30, 2012 (June 30, 2012 - $29 million; September 30, 2011 - $7 million) represented primarily the following items (a) the deferred tax effects of unrealized gains and losses on available-for-sale debt securities, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines; (b) the deferred tax asset corresponding to the pension liability adjustment recorded as part of accumulated other comprehensive income; and (c) the deferred tax liability associated with goodwill and other intangibles.

Reductions in expected cash flows for ASC 310-30 loans, which may impact the provision for loan losses, may consider reductions in both principal and interest cash flow expectations. The amount covered under the FDIC loss sharing agreements for interest not collected from borrowers is limited under the agreements (approximately 90 days); accordingly, these amounts are not subject fully to the 80% mirror accounting.

Quarterly average assets

Quarter ended

(In millions)

September 30, 2012

June 30, 2012

Variance

Covered loans

$

3,952

$

4,129

$

(177

)

FDIC loss share asset

1,578

1,700

(122

)

Activity in the carrying amount and accretable yield of covered loans accounted for under ASC 310-30

Quarter ended

September 30, 2012

June 30, 2012

(In thousands)

Accretable yield

Carrying amountof loans

Accretableyield

Carrying amountof loans

Beginning balance

$

1,574,850

$

3,729,489

$

1,542,519

$

3,894,905

Accretion

(66,168

)

66,168

(73,988

)

73,988

Changes in expected cash flows

(37,800

)

106,319

Collections / charge-offs

(168,448

)

(239,404

)

Ending balance

1,470,882

3,627,209

1,574,850

3,729,489

Allowance for loan losses - ASC 310-30 covered loans

(103,547

)

(93,971

)

Ending balance, net of allowance for loan losses

$

1,470,882

$

3,523,662

$

1,574,850

$

3,635,518

Activity in the carrying amount of the FDIC indemnity asset

Quarter ended

(In thousands)

September 30, 2012

June 30, 2012

Balance at beginning of period

$

1,631,594

$

1,880,357

Amortization

(29,184

)

(37,413

)

Credit impairment losses to be covered under loss sharing agreements

18,095

29,426

Decrease due to reciprocal accounting on the discount accretion on unfunded commitments